[avisidhu]

Originally Posted by vj123

Buying vs Leasing is a highly debatable topic and it ends up being a personal preference.

If you are planning to keep the vehicle for a while, buying would make more sense. Leasing is targeted towards people who prefers changing vehicles every 2 or 3 years. Another advantage of leasing is liability, you dont have to worry about any depreciation due to accidents.

Thank you VJ! Does the resale value of a vehicle in 3-5 years have any impact on this decision? Also, does anything change if the interest rate for financing a vehicle is around the typical 7% that car dealerships charge ?

[vj123]

Originally Posted by avisidhu

Thank you VJ! Does the resale value of a vehicle in 3-5 years have any impact on this decision? Also, does anything change if the interest rate for financing a vehicle is around the typical 7% that car dealerships charge ?

With a lease, lender (OEM) owns the vehicle and you are theoretically renting it for the negotiated duration. At the end of the lease, you will handover the keys and walk away. You will only get back your security deposit (if any) while you initiated the lease.

Vehicle value at the end of lease is determined / negotiated when you buy the vehicle and doesn't change. You will have an option to buy the vehicle at the end of your lease for the predetermined value. Once you get your money factor from your dealer, you can calculate your monthly APR and it tends to be way higher than regular financing. Lease also has other additional fees (lease disposition fee, etc). If you are looking to lease, you might want to familiarize yourself with residual, money factory, security deposit terms and also play spend time in leasehackr forums. Since any lease deal depends on several variables, dealership will try to take advantage of customers.

If you finance your vehicle, it will be a straight forward deal (negotiated price, dealer fee, registration, sales tax). Resale value depends on the market while you sell the vehicle and also vehicle condition (accident history, if any).

[Rajamass]

Hi welcome to the US

I see myself in your place few month back. I vote for Kia Telluride. I am not sure how long you will be here in US but if you are going to stay for more than 3-4 years just go with new car as second hand market is insane. Alternatively, Mazda CX-5 is a quite popular car here for price below 40$K.

If you are looking for pre-owned cars, just buy Carfax 6 reports plan for 99$. In my experience, many dealers or individuals tell that their cars have clean history but when I ran a Carfax report, I found several discrepancies. So it's worth buying. Also make sure that the cars you are checking are not from Midwest regions where snow is predominant. These cars are offered for less price and will have less lifetime than those from California or Texas or Arizona where weather conditions are dry throughout the year.

[mobike008]

Originally Posted by avisidhu

Hi folks, if I intend to buy a new car and then keep it for 5-7 years, how do the lease vs. buy options compare? What are the factors impacting this choice?

I never thought leasing makes any sense, but considering how many people opt for leasing there has to be some advantage?

I will tell you why leasing is better than buying a new car.

Let me take a hypothetical example here of a car costing $50K.

Option 1 (Leasing)

Stage 1

Lease the car for 3 years and 12,000 miles/year.
Monthly EMI (Typical for a $50K car) : $700/month.
36 Months amount paid : $25,200.
$0 expenses on services during this 36-month period and 36,000 miles.

You return the car and walk away or get a brand new car.

Stage 2

If you decide to buy the same car after you lease period ends.

When you sign the lease, they will tell you what car is worth at end of 36-months and this is where you negotiate and put a smaller value (45% of car value is a good thumb rule. Dealers will force you to sign at 55% of value).

Assume you got 45% of value in your contract which is amount need to buy this car is $22,500.

3% APR for 60 months for $22,500 : $2,025.
Monthly EMI for 60 months : $22,500 + $2025 : 24,525/60 ; $408/month.

Summary : Both stages (Leasing & Financing) your monthly cost is lower.

Now lets see if you finance the car right away.

Option 2 (New Car Finance)

Car Value : $50,000.
APR 3% : $1500 per year.
Maximum Tenure you can finance (usually 60months for Indians and not 72 months which is for long term residents or US citizens) : APR Money for 5 years is $7,500.

Monthly EMI Calculation : 50,000 + $7,500 : $57,500/60 months.

Monthly EMI works out to : $950/month.

Note : I calculated flat and not reducing principal value each year for sake of simplicity.

Summary : Your monthly payment when you buy/finance is ALWAYS higher than when you lease/lease + buy.

At the end of the day, cars are depreciating asset.

I'm a big advocate of leasing. Why get stuck with one car for so many years as it gets boring to drive the same car after 2-3 years.

Lease and keep driving new cars every 3-years and no headache of services as AL that headache is covered in lease cost. Nobody is going to make money on a car if you keep it for less than 7-years which feels like a lifetime. (Except the current pandemic situation where people are making money on cars. )

I will never buy a car and keep it for 5 years or beyond. (Those crazy thoughts of keeping a car that long is coming to be only for my current car as it's that awesome ).

Hope this makes your decision simple. Good luck and Cheers !!

[avisidhu]

Originally Posted by mobike008

I will tell you why leasing is better than buying a new car.

...............
I will never buy a car and keep it for 5 years or beyond. (Those crazy thoughts of keeping a car that long is coming to be only for my current car as it's that awesome )

Hope this makes your decision simple. Goodluck and Cheers !!

Thank you Mobike, this is much appreciated! This certainly gave a different perspective and I will use this template to make a decision.

I guess the only thing different for me would be the tenure of the loan since I'm a resident, so 84 (maybe even 96) months is possible, which takes some sting out of the EMI. That being said, I'm still a bit conservative and will extend only if I can afford the 60 month tenure to begin with. Although now, this point might be moot if I gravitate towards lease

[infotech58]

Originally Posted by avisidhu

Hi folks, if I intend to buy a new car and then keep it for 5-7 years, how do the lease vs. buy options compare? What are the factors impacting this choice?

I mostly lease and following are some considerations you should think along the lines of:

Pros of leasing:
- Tax write off if you are self employed or incorporated (in case of owned vehicle you are limited to 30% of 30k + tax per year (under CCA class 10/10.1 unless you buy an electric vehicle)
- No depreciation concerns in case of not so reliable vehicle (just walk away at the end of lease) OR loss of value due to an accident
- Usually lower monthly cost compared to financing (even at 72 or 84 months) for same vehicle
- Predictable servicing costs (due to warranty coverage)
- With some manufacturers (say Lexus) you can reduce the lease interest rate by putting some security deposit (refundable at end of lease) to bring the monthly cost further down (if you have no other use for that cash)


Cons of leasing (these don't apply if you lease first and then do buyout):
- Leasing is not for you if you drive a lot (usually higher than 24,000 km/year); there is usually a per km charge (typically 10c/km - 40c/km) for mileage over the lease allowance OR the residuals drop significantly above 24,000 km/year allowance making lease expensive
- You have to be little more careful with upkeep of vehicle (to avoid any unusual scratches, dents, tears, etc. as they will need fixing during lease return)
- Lease buyout will result in re-registration and you being the 2nd owner of the vehicle (if that matters)
- If you put a down payment for lease and you total the vehicle (or if it gets stolen), you lose that money (insurance pays the vehicle owner (leasing company) the residual value and lease just terminates
- Slightly different process to get out of a lease early (early termination OR trade in)


Other considerations:
- Do not lease a vehicle for longer than its warranty period (duration and mileage)
- Do not get extra insurances/protections unless you think you'll need them:

- extended warranty (if your lease ends within original warranty period
- lease end wear and tear protection (has gotten very expensive these days)
- tire and rim coverage (some are good while others are bad; Mercedes once refused to replace a bent rim citing that it is still not leaking air BUT they won't accept that rim while returning the lease citing the damage)

- Depending on how much you drive, you may have to change tires and/or brakes (specially german, AWD SUVs) before you return the lease (account for that cost in overall cost of ownership; I have had to do tires at around 50k kms for most of my leases)

- Lease + buyout is not always cheaper than outright finance (specially on high residual vehicles). Example below (2022 Kia Telluride Nightsky (Canada))

Finance: $66,651.92 @ 4.99% for 84 months = $941.74/month = $79,106.16
Lease + Buyout: (48 payments of $782.21 (tax in)) + ($902.87 (admin + safety + tax) + ($45,959.42 (residual + tax) = $84,304.50 OR more if you need financing for buyout too

If you decide to go down the rabbit hole of lease calculations, PM me and I will send you an excel calculator I created to reverse engineer residual values from interest rate and monthly payments (most manufacturers don't mention residual values in their web calculators).

[vj123]

I have bought 8 vehicles in the last decade but the current market is totally absurd with component shortage and logistic nightmares. Having bought three vehicles in the covid era, below is my buying experience so far.

• Spend enough time in the respective car forum before contacting dealers. It would give an idea of the current market for that specific vehicle and you might also get dealership contacts through fellow members.
• Reach out to as many dealers (even out of state) as possible. The type of response would help you shortlisting the dealer list.
• Several dealers charge over MSRP even for a basic commuter vehicle but you can find dealers offering vehicles for MSRP if you do the right legwork. I got a decent discount on mine.
• Even if the dealer is offering the vehicle for MSRP, make sure there isnt any mandatory addons or fees over the state mandate. OEMs allows dealers to add finance apr or lease money factors upto a certain percentage and make sure that they are giving you the base rate offered by the manufacturer if you are financing through the dealer.
• Almost all dealers have a waitlist even for a commuter vehicle and you might need patience between ordering it and taking delivery. It might take anywhere between a couple of months to even a year.
• If you are planning to trade in a vehicle, try to keep it as a separate transaction unless you have a huge sales tax benefit. Other dealers or online retailers might give you a better offer than the dealer whom you are buying from.

[shishir1993]

Hi Bhpians! Hope everyone is doing well and keeping safe!

It's my first time posting here so please excuse if I did not follow any of the Board rules

A bit of background... I've gotten an opportunity to move to the US on a permanent assignment. I am looking to lease a German big 3 or a Lexus sedan for around 3 years. I expect my annual mileage to be around 10K miles and it will be mostly traveling to the office (which is less than 5 miles from my home) and visiting my folks in and around the west coast. For longer distances, I prefer to fly, so the mileage seems to be adequate.

My questions:

1. Which of the German 3 or Lexus is better to lease? I will most likely buyout the lease at the end so I am thinking long term
2. Is there any dealer in and around the Chandler, AZ area that you've had a leasing/buying experience with and would wholeheartedly recommend?
3. I would definitely prefer a petrol or hybrid sedan so which cars should I be leasing? This will be my first car ever in the US, so I would not want anything larger/more expensive than the Lexus Es300h.

Thank you in advance!

[vj123]

Originally Posted by shishir1993

• Which of the German 3 or Lexus is better to lease? I will most likely buyout the lease at the end so I am thinking long term

Traditionally, BMW used to offer great leases (among the Germans) in the US with artificially higher residuals but the current market is very different. With higher interest rates and almost zero incentives from most manufacturers, it might not be a good time to lease. To give a comparison, dealers are quoting M5 payment (pre covid) for the current M3 (i have been tracking that market for a couple of years).

Eventually, it depends on the brand and model. You might be able to find a good lease deal on a vehicle which a dealer is trying to unload or to meet their monthly target. If you decide to move forward with a lease, you should spend time on leasehackr forums. You will get a generic idea of the current market on all vehicles and also leads for a good deal.

[mobike008]

Originally Posted by shishir1993

My questions:

1. Which of the German 3 or Lexus is better to lease? I will most likely buyout the lease at the end so I am thinking long term
2. Is there any dealer in and around the Chandler, AZ area that you've had a leasing/buying experience with and would wholeheartedly recommend?
3. I would definitely prefer a petrol or hybrid sedan so which cars should I be leasing? This will be my first car ever in the US, so I would not want anything larger/more expensive than the Lexus Es300h

Welcome to America !!

If you want an exciting car to drive, look no further than a BMW. If you want a nondescript, smooth and luxurious car then Lexus is the way to go.

Leases for BMW 3-Series will start $500/month with ($2K-$3K down payment) to all the way up to $1500/month for M Spec cars for a 10K miles/annum, zero maintenance for 3 year lease deals. Choose your poison based on your budget.

Keep in mind the insurance for first time buyer will be higher and will be in range of $150-$200/month and gas will be another $200-$300 per month depending on how much you drive. So do factor this cost into your monthly expense budget.

Lexus lease might be 20-30% cheaper depending on the model.

Nobody buys diesels in America (except the big trucks) so you will only find petrol, hybrid or EV options.

Cheers and Keep us posted what you went for and how much it costed you.

Goodluck !!

[mazda4life]

Originally Posted by shishir1993

A bit of background... I've gotten an opportunity to move to the US on a permanent assignment. I am looking to lease a German big 3 or a Lexus sedan for around 3 years.

Welcome to our valley, I am in north Phoenix and you can check this dealership https://www.arrowheadbmw.com/ , this is very near to my residence and see good amount of activity , but it might be slightly far from your place. Try to look for some dealers in Mesa,AZ as the local tax is lower than Chandler. I can recommend a good dealer if you are open for Mazda

[theMAG]

Originally Posted by shishir1993

..
I am looking to lease a German big 3 or a Lexus sedan for around 3 years. ..

You are looking to be in the car market here when it is at its most expensive yet, and continues to become pricier due to well advertized challenges and most brands (except Mitsubishi - which no one buys) are seeing record dealer markups (money you will have to fund that is outside any finance option); you'd want to keep this firmly at the back of your mind.

The average cost of a new car is currently at around $47,000.

Why am I taking time to mention these? Because, it will mean one of two options for you - to level set your expectations:

1. You might very well have to consider a smaller vehicle to be in your stated monthly payment, or

2. You will have a higher monthly payment than your stated limits, to afford a regular/larger vehicle from the brands of your choice.

You'll notice I havent even begun to describe the potential wait times.

[GutsyGibbon]

Originally Posted by shishir1993

My questions:[*]Which of the German 3 or Lexus is better to lease? I will most likely buyout the lease at the end so I am thinking long term

Welcome aboard. I would recommend that you take a long hard look at Genesis. The G80 is a RWD beast, with awesome interiors, all for under $50k. In my opinion this is a great value for money, the interiors are better than all the German & Jap luxury cars. I have 2 colleagues who got Genesis sedans this year. The G70 lease is $499 for 36 months, or $40k very well equipped. I am not a fan of Hyundai or Kia, but Genesis is a looker.

[mobike008]

Originally Posted by GutsyGibbon

I am not a fan of Hyundai or Kia, but Genesis is a looker.

Despite owning 3 brand new Hyundai's in India in the past, I can never bring myself to buy a Hyundai or Kia here in the US.

N-Line looks interesting. But, will I ever buy it? Nah!

Btw, agree on Genesis. Looks gorgeous but, owning it is not my cup of tea.

[landcruiser123]

Originally Posted by shishir1993

1. Which of the German 3 or Lexus is better to lease? I will most likely buyout the lease at the end so I am thinking long term

Welcome! What are your specific requirements and budget? I'd suggest zeroing down on a brand/car and then hunt for deals. Leasing is a smart move - if you don't like the car, you can just part with the it after 3 years.

If you are looking purely for badge value, reliability, and a fuss-free experience, you can't go wrong with the Lexus ES range. BMW, Merc, and Audi have their advantages (and disadvantages) too. If you're open, check out some Volvos. A friend of mine got an S60 last month and he loves it.